Intro:

This week I got an interesting comment on a related compensation post on LinkedIn, in which I stated:

2 tips that stood out in building a compensation plan for your sales reps:

1. When you build a comp plan, you really need to think, what are my goals as a company
2. How do I incentivate and motivate those teams to drive their behaviour towards those same goals

I got the following reaction on it:

J.G.:

“Absolutely nothing was said. You have to align your comp plan with the strategy of your business. Duh. Everything has to align with the strategy of the company, that is why we call it a strategy.”

I get his reaction.

After all, it sounds logical right?

We set targets in line with our strategy.

Unfortunately, everywhere we see that this doesn’t happen.

Misalignment is one of the biggest challenges in organisations. It is due to politics, misunderstandings, setting unclear goals, sabotage (yes!), creating the wrong strategy …

What does compensation has to do with all of this?

Strategy defines how we will achieve our goals, in other words, it defines the actions we (should) take.

A comp plan drives behaviour, and it becomes immediately clear, that when a comp plan is not crafted in the right way, it will steer the behaviour in the wrong direction, or if it will be gamed, resulting in the wrong outcome.

I had a conversation with Sergio Gonzalez, CEO and founder or Remuner on how to craft the right comp plan for you.

What we spoke about with Sergio

For the full episode, go to:

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This is also what we concluded with Sergio: creating the right compensation plan for you (context is everyting here!) is crucial, as it drives employee motivation and organisational growth.

The key is here to link both with each other.

Sergio launched Remuner due to his previous experience as COO of Signaturit:

He saw 3 challenges:

• personal challenge: where commissions where the biggest investments for the company, and he realised they did a poor job in aligning the objectives and the incentives.
• his teams challenge: that spent hours on manually calculating the commissions in excel, with lots of questions and unhappy conversations back-and-forth
• the sales reps: that were unhappy due to lack of transparency, no visibility of where they are with their results…

And Remuner helps fixing this.

The following check list will help you creating a better aligned comp plan:

Checklist: Steps to Create a Relevant Compensation Plan:

1. Define Goals: Define the goals you want to achieve, and break them down into SMART based objectives
2. Distribute KPIs across org: Make sure that they are all aligned with each other, and that they are broken down up till the individual level.
3. Define principles for your compensation: Some principles around your comp plan should be – in my opinion: make them achievable, have accelerators and a cliff, be above market conformity, give high achievers the chance to gain massively, check for unintended consequences, prevent abuse and stimulate alignment
4. Design Structure: Develop a structure, in line with goals and values of the company
5. Allocate budget: Allocate the necessary budget, and forecast several scenarios based on a percentage of the people that will achieve, some that will overachieve and some that will not achieve any target. Measure the impact on revenue vs. commission cost in these different scenarios.
6. Make it simple: Reduce the amount of variables in the commission plan. I had the best results with 1-3 items, and frankly saw the performance dropping from 2 already! Work with incentives if you want to push something extra.
7. Incorporate Flexibility: Build flexibility into the plan to adapt to changing business conditions (like market conditions, new product launches …)
8. Communicate Clearly: Communicate the details of the compensation plan and set open hours creating buy-in from employees. Demonstrate how they can reach their goals, and demonstrate how their compensation would have been in the previous time frame based on the new plan.

And this was it!

If you are a b2b tech founder or sales leader looking to grow your business, then I can help in the following ways:

→ Need more structure? I help crafting a revenue strategy for you

→ Need more revenue? I get you unstuck: better leads, higher conversion rate, better performing reps

→ Need sales leadership? I step in for mid market and complex sales orgs as a fractional sales leader.

Schedule a free strategy call to discuss your specific needs and how I can customize a solution for your business here